15 Sep 2014

Equity markets have tip-toed into autumn, faced with the continuing
concerns of Russian expansionism and the barbarity of the IS caliphate. The ECB
has finally launched its version of QE, just as the Fed is about to exit its
own, yet markets seem to be holding their nerves. In India, the Nifty has added
152 points to close 1.9% ahead at 8106 after trading in a range of 3%. The
benchmark index has held firmly above the 8000 level on the strength of FII
inflows of more than $1bn so far in September; total FII flows now amount to
$30bn so far in 2014, of which $13bn has been directed to buying equities.

In the short-term, the market will probably be influenced by external
factors, but even at the current record levels of the Nifty, the market
valuation remains around the long-term average, especially on a one year
forward basis. Positive investor sentiment and the sustained FII inflows
suggest Indian equities remain a good buy.

1 Sep 2014

At the close of the first quarter earnings
season, the overall outcome looks prospective: although revenues improved
modestly, EBITDA margins improved by about 1.5% on average. Moving them back up
towards their long-term average. With corporate borrowings lower, interest
costs also contributed to improved profitability, so that it looks like a cycle
of earnings upgrades is upon us. The market has appreciated by 5.8% over the
past two months but earnings have outpaced it, at 7.2%. So the market PE
multiple has contracted from 16.3 earlier in the year, to 15.5 now. Future
earnings are now being forecast to grow at 16% this year and 17% next, giving
room for further market appreciation in the near-term. Longer-term, Friday’s
announcement of a jump in GDP growth to 5.7% in the first quarter gives reason
for optimism for sustained market momentum over a two to three year period.

The half-year report for Himalayan Fund has
been posted on the Fund’s website at www.himalayanfund.nl , showing excellent
performance in the first half-year; this has been sustained so far in the
second half. The outlook for the Indian markets is for continuing improvement
in earnings, supporting current valuation levels and offering the prospects of
multiple expansion over a sustained period. It is time to buy the Fund, look on
the website for instructions on how.

About Himalayan Fund NV

The Himalayan Fund N.V. is an investment company with its primary objective to generate long-term capital gains for shareholders by investing in India.

This blog shares with you interesting, weekly news about the Indian economy. It provides insights about the financial situation in India and its market. The team of Himalayan Fund offers knowledge about investment opportunities relating to India.

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Do you want to receive a weekly newsletter form Ian McEvatt, chairman of Himalayan Fund NV, with observations of the past week and some pointers on the Indian economy to look for in the week ahead please send an email to blog@himalayanfund.nl